The Appearance of Carriers and the Origins of Money

The main goal of this essay is to provide microfoundations in a spatial general equilibrium framework for the fact that individuals use money to make transactions, and hence microfoundations for the cash in advance constraint. We analyze the emergence of a monetary economy out of a redistribution barter system where goods are sent to a central market and then redistributed among individuals. We show that, as the population increases beyond a certain point, the barter exchange system becomes too expensive. To reduce the exchange system cost, and as a result of individuals’ rational behavior, a new specialized merchant, the carrier, appears and causes frictions among traders leading to the appearance of money. There are, however, certain conditions for this process to succeed. These conditions concern the economic characteristics of those goods chosen to act as money, and the level of economic development.Barter, Money, Carrier, Market center, City, Transaction cost

Monetary Instruments and the Control of Liquidity in the Philippines: Focus on Open Market Operations

Monetary policies refer to the actions of central banks aimed to achieve macroeconomic stability and to influence financial factors such as money and interest rate. This paper discusses the framework for analyzing how monetary instruments affect monetary targets and the advantages and disadvantages of various instruments dispensable by the central bank. It also argues for the use of open market operations.central bank, money and banking, financial system, financial stabilization, monetary policy, open market operations, monetary instruments